“However, the momentum for the liberalization of global trade now appears to be facing strong resistance. A halt in the movement toward freer trade or outright backsliding, such as the erection of new barriers to the trade of goods or services, would endanger the sustainability of the current productivity boom.”

President Bush has not been a paragon of virtue on this issue. One has every right to criticize his administrations lack of guts. Still, John Kerry and John Edwards will probably be far worse. What more needs to be added? Practical politics is often about choosing the lesser of evils. Did your mommy promise you a rose garden? If so, she lied to you.

It’s also nice to read the pro-free trade remarks of Brad DeLong. Isn’t he the guy who is being treated like a punk by John Kerry? When will DeLong have a talk with the Massachusetts senator? They currently do not seem to be entirely on the same page.

To finish DeLong's partisan jab....

"It has also not been the result of any action taken by the Bush Administration...."

....or the result of any action of the Clinton Administration. I think he is trying to imply that somehow he (as a member of the Clinton economic team) had something to with the productivity revolution that has been on an unabated pace since the early 1980's. Clinton was a beneficiary, not a prime mover of this trend.

By the way, anybody who takes DeLong seriously should read Donald Luskin's website (www.poorandstupid.com) to learn more about this academic economist who hasn't written a peer-reviewed article in almost 15 years (his last one ended quite badly).

Daniel Drezner is often frustrated by the lack of support for free trade among American voters. He conveniently ignores the enormous damage caused by pro-growth Democrats such as Brad DeLong and Robert Rubin. Both of these guys regretfully adhere to the unofficial rule:

You don’t have to lie, but one is expected to keep their mouth shut so that Democrats can win elections!

Did anyone notice pro-growth Democrats publicly dissenting when their party won two major elections in Louisiana due to last minute scaring voters about protectionism? Is Brad DeLong going out of his way, for instance, to blast John Kerry for his anti-trade rhetoric? Of course not. The number one goal is to win elections. Educating voters is put on the back burner.

In answer to David Thomson, people on the left and right wear their ideological blinders. Our guys mistakes or misrepresentations are always less egregious than the other side's mistakes and misrepresentations. Its not really productive to engage in endless games of Gotcha! on some small hypocracy, because the other side will just dredge up their own lists.

What confuses me most on a lot of these debates about economics is that they are so often far removed from real studies. For every country that completely liberalizes trade and succeeds, there's one that seems to just dig itself into a hole.

Then, when a country like Malaysia is met with dire warnings about destroying their economy with temporary restrictive measures, those predictions are proven wrong.

It sounds to me like the devil is in the details for all of this, and that the broad point that productivity goes up with free trade might be true. The problem is that there are plenty of real world counterexamples when one tries to get specific.

I also hear a lot about the idea that freer trade means a more volatile marketplace with bigger ups and downs. Is there any economic data and/or theory to back that up, or is it just anecdotal? If that proposition is true, it sounds as though some productivity might be worth losing for added stability.

"It sounds to me like the devil is in the details for all of this, and that the broad point that productivity goes up with free trade might be true."

It is a very broad point. I mean, you can boost productivity in your factory (or software firm) by saying, 'Come in early, work late, and double your output per hour or I will move this factory to Thailand (or India).' But, is is sustainable, or helpful to our economy? Broadly speaking, it sounds like our productivity increases are a part of a race to the bottom where the only winners are shareholders.

How do you explain the flatness of wages lately in the face of these miraculous productivity increases? In the mid to late 90s, we had both productivity gains and real wage increases in all 5 income quintiles.

As a Thinking Independent:
Those in archaic dismal sc. of economics do not change their thinking nor allow for for static/dynamic segments of any economy. I am not alone in thinking that their theories of free enterprise, unbridled capitalism, etc. are largely archaic fallacies and indoctrination. These guys are blah, blah, blahers, to smart people. I am ready willing and able to discuss --on several occasions.

To begin with, increased productivity has been done off the backs of fewer workers. European workers have 9 weeks off a year. No, I am not a socialist. Nor have I been for too high union benefits,including overpaid and overbenefited govt.employee unions looting(which now requires special taxes on them alone --to pay for their own looting in my view). I am very concerned about losing technological prowess and research,industrial production and research, so important to maintaining key aspects of this country.

U.S. trade deficits and the effects of are very worrisome to me. The public, including the college educated, are gorging themselves on cheaply made foreign goods. We cannot endure by importing products made for a few dollars a day. Even all their home improvement products they pick up at the local Home Depot are more often than not foreign made. Nor does Ultra high real estate pricing mean real wealth to the country. Too much paper funny moneys out there under guise of investments in America.

U.S. govt. debt is way out of line. Another huge concern to me. Asian central banks have bought huge chunks of the debts created by the American
excesses and its funny moneys passing as investments.

The country has massive immigration problems and costs.

Japan has had a huge trade surplus for the last decade, yet was mired in a depression for at least 10 years. The last 2 times we had a "trade surplus" were in 1981 and 1991. Coincidentally (actually NOT coincidentally) both times were in the middle of recessions, 1981's a very severe one. During the intervening times of economic growth, 40 million jobs being created and America far out distancing any other country in the world as the premier economy on the planet, we have had a trade "deficit" or a capital surplus, said another way.

There is a simple way to turn the trade "deficit" into a trade "surplus": drive our economy into a severe recession, and hold it there for years. That aught to do it.

Very dumb.

DSpears --Good example of intellectuals use of wrong stats to arrive at non-real world conclusions.

Oh, so you're saying a $142B trade deficit is good for U.S.? Most anything out there in stores(including high tech products) one picks up is not made in U.S. Jobs growth over past several years has been in paper professionals, which drain an economy. Other job stats in security, govt. jobs or two part-time jobs traded for one. Asians owning a trillion of our debt is good in your view? A $423B military budget is wise?

“In answer to David Thomson, people on the left and right wear their ideological blinders. Our guys mistakes or misrepresentations are always less egregious than the other side's mistakes and misrepresentations.”

Are you paying attention? I have consistently and unhesitatingly criticized the Bush administration for its gutlessness on free trade issues. Why should I expect anything less from Brad DeLong and Robert Rubin when Democrats misbehave?

“A $423B military budget is wise?”

No, such a small military budget is very unwise. We should probably be spending at least twice that amount. You obviously do not agree---and I strongly suspect that you speak for a sizable number of Democrats. I have long argued that the Democrat Party is highly influenced by its dishonest pacifists. There is no doubt that John Kerry and many of his supporters desire to place a higher priority on domestic issues. The war on terrorism interferes with their bicycle path politics. Do the majority of American voters agree? We will find out in less than four months.

I'm off topic here I know but I am looking for a guest/partner for my blog. Please let me know if you have any tips and if anyone here is interested let me know as well.

"Oh, so you're saying a $142B trade deficit is good for U.S.? "

Since 1983 the american economy has created almost 40 million new jobs, has grown every quarter but 3, the Stock Market has doubled almost 4 times over, productivity has increased at an unprecedented rate, every measure of economic health has increased with every income group benfitting. Since 1983 America has far outdistanced it's nearest competitors on a per-capita GDP level (which means every American is richer any every Japanese, German, Indian or Chinese) by a large margin. In fact it would take the nearest competitor at least 15 years to catch up to our level, assuming we stagnated at 2004 levels.

Now, all of this happened while running what people at the time thought were large trade "deficits". Republican or Democrat administrations, budget deficits and surpluses, war and peace, it's one of the few features of our economy that has been the same for the entire period.

What would the last 20 years have been like with a trade "surplus"? Would we be more like Japan and not grow for a decade? Obviously the doomsday scenarios that have been trotted out for the last 30 years about trade deficits have never come to pass. Maybe that's because they are based on faulty economic reasoning.

"Asians owning a trillion of our debt is good in your view? "

Foreigners have decided that their best investment returns are in America, not their own countries. I have a hard time looking at that as bad. The Japanese and Chinese central banks are buying our securities (i.e., taking US dollars out of circulation) in an effort to keep their currencies relatively low against the dollar so they can export to the U.S. That means we get goods from their countries relatively cheaply (while their consumer have to pay more for the same goods and anything they buy form us). They do this because their domestic economies do not provide the opportunities that exporting to America does.

The money Americans save by buying cheaper goods (due to the exchange rate affected by these central banks) can be spent on other goods or invested at home. Add in subsidies that their governments give to their businesses who export to us, and essentially their governments are paying us to buy their goods at prices cheaper than their own people can buy them, and their taxpayers are paying for it. Sounds like a good deal to me.

The reason for this of course is that once a foreigners sells something in America they have to do something with the dollars. They can either buy American goods or services or they can invest in American securities. Their only other choice is to tarde them in the currency markets, but again that would tend to rais ethe value of their currency and depress ours, the opposite of what they are trying to achieve.

To answer the question "is a trade deficit good?" The answer is: The balance of trade, surplus or deficit has good and bad features, neither is preferable. So doing anything to change it is pointless. Either way there are good and bad trade-offs to be made.

But the American economy is the premier economy in the world and it achieved this dominance with a constant trade "deficit" or rather and investment surplus.

The doomsday scenarios have been trotted out for 30 years about trade "deficits", and in fact some of the worst economic policies of the 1970's were aimed specifically at fixing this "problem". Yet none of the doomsday senarios of some James Bond super-villain buying up all of Americas debt and using it to bring the American economy to it's knees have ever come to pass, mainly because they always rely on some foreign entity doing something that makes no economic sense whatsoever.

If we could magically shrink our economy at 4%-5% a year for a couple of years (assuming we could do that without bringing down everyu otehr economy on the planet with us), the trade deficit would go away, I can assure you of this.

Hopefully we won't try it.

Totally disagree that $423 military budget is not more than enough. Also,totally disagree that massive trade deficits,losing technological and industrial prowess, industrial research, while funny moneys spread around is good for this country.

Totally disagree with use of DSpears figs. and conclusions. Models are outdated and defy pramgamatic realities. No sense on going on for hours about it. We are becoming slavelike.

The only outdated models are the ones that assert that a trade deficit is "bad" and a trade surplus is "good". Those are very old ideas that just don't fit with the facts.

How do you explain the flatness of wages lately in the face of these miraculous productivity increases? In the mid to late 90s, we had both productivity gains and real wage increases in all 5 income quintiles.

I don't know anything about wage "flatness", I didn't even know that was an economic statistic.

I dispute that real wages are behaving differently now than in the late 1990's, even during the years of the stock market bubble, or during the last 20 years for that matter. q

But if you are implying that it (whatever it is) is caused by the trade deficit, then it would have had to be a constant condition over the past 30 years. Again, we have had a trade deficit since 1973. If you are trying to imply that the trade deficit is causing some economic condition, then that condition would have had to have been present for the entire period. Otherwise you haven't even shown correlation much less cause and effect.

What is different now? Certainly not the trade deficit. We had one for the entire 1990's.